Mortgage Broker vs Mortgage Banks: What’s The Difference?
If you’ve Googled mortgage companies, you may have noticed that not all mortgage lenders are the same. On one end you have mortgage banks, and on the other, you have mortgage brokers – Both eager to tell you why they are the best home for your next mortgage loan!
So, what’s the difference? Well, let’s have a look!
Mortgage Broker Who?
A mortgage broker is someone who acts as a sort of middleman, between you (the homeowner) and the actual mortgage lender who is providing the funds. They help you to prepare loan applications, financial documents and can issue pre-approvals.
Mortgage brokers work with various lenders and banks and have the ability to shop around and get creative with your mortgage options. The broker will also take care of all paper-work, and work as your advocate to get approvals and exceptions where normally you might run into trouble. The lenders and banks often pay the broker a commission for a successful closing.
So What’s a Mortgage Banker
So mortgage bankers actually fund the loan internally. They may even service some of their loans (collect the payments for the investor)
If you work with a banker, they’re going to set you up with loan programs they sell or broker to different investors. Often times they’ll offer excellent rates, but only if you meet their minimum credit requirements.
The big difference between depository banks and mortgage bankers and mortgage brokers is that they have access to portfolio loan programs. These are bank deposits that are offered as mortgage loan programs. In addition to portfolio products they can act as a mortgage banker and a mortgage broker so they also tend to have more loan options. They can lend their own funds, sell loans to Freddie Mac, Fannie Mae and the local Federal Home Loan Banks and service them or broker loans to various Investors. Most depository banks service their own loans.
A depository bank can often offer lower rates and fees and get the loan closed quick. They can offer more mortgage programs such as Construction, Rehab, Lot, Jumbo(over $453,100,) and Portfolio loans. Many offer Conventional, VA, RD, FHA and many more. Most Second mortgages and Home Equity Lines of Credit (HELOCs) are offer through depository banks.
Some offer Installment and Revolving loans such as Auto, Boat, RV, and Credit cards or Lines of credit. Depository banks may offer Commercial loans to businesses and investors in their community.
They all offer Depository products, Checking, Savings, Certificates of Deposit, IRA accounts.
But who’s giving me the best deal?
So this is where your head might start spinning – Trying to figure out where you will get the best deal! Unfortunately, it’s not that cut and dry. We’re not dealing in absolutes here.
A mortgage broker will tend to offer a variety of options.
However, the mortgage banks will typically give you lower fees up front, since they don’t have a middle-man to pay, and can close the loan a bit quicker as well. But the banks also tend to have stricter requirements, and less flexibility.
Depository banks have options not offered by mortgage banks and mortgage brokers and offer lower fees and rates and can close quick. But just like mortgage banker ans mortgage brokers they will specialize in certain loan products, residential first or second loans, commercial, Jumbo or small consumer loans.
Once again, I have to reiterate that all of this is simply a rule of thumb – Not set in stone!
The best way to figure out which direction will be best for your particular situation is to have a full credit analysis performed by a mortgage professional. Here’s how to schedule a free, zero pressure mortgage review:
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